AT&T has completed its acquisition of DIRECTV to become the largest pay television provider in the United States and the world. The company lost 23,000 customers to its U-Verse television service, the first real loss since launch. However, with a combined coverage of 26.36 million subscribers in the United States, it will now overtake Comcast, which has 22.30 million television customers, having lost 69,000 over the quarter.
As a result of the integration of DIRECTV with AT&T, the company plans to launch new integrated television, mobile and internet offers.
“Combining DIRECTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed Internet service,” said Randall Stephenson, the chairman and chief executive of AT&T. “We’ll now be able to meet consumers’ future entertainment preferences, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the internet to any screen.”
Mike White, the chairman and chief executive of DIRECTV announced his plans to retire. John Stankey will be chief executive of AT&T Entertainment and Internet Services, responsible for leading its combined DIRECTV and AT&T Home Solutions operations.
As part of the approval of the transaction by the Federal Communications Commission, AT&T agreed to a number of conditions for the next four years. It has committed to offer its all-fibre internet access service to at least 12.5 million custom locations, including homes and businesses within four years. It must not favour its own online video programming services in offering its fixed broadband internet services. However, it can offer discounted integrated bundles of video and high-speed internet.
The announcement comes after AT&T reported its first real decline in AT&T U-verse television numbers. After 30 quarters of consecutive growth since its launch, AT&T has so far failed to break through six million subscribers.
At the end of 2014 AT&T reported a loss of 125,000 subscribers, after selling its Connecticut operation to Frontier, including around 197,000 U-verse TV subscribers. Otherwise there were net additions of 73,000 subscribers.
In the first three months of 2015 AT&T only added 49,000 subscribers. That was better than many competitors, but only around a quarter of its previous run rate. That turned into a net loss of 23,000 subscribers in the second quarter, for a total of 5.95 million.
John Stephens, the chief financial officer of AT&T told analysts this was as a result of fewer promotions and mainly targeting high-value subscribers, resulting in 4% revenue growth. He said the second quarter is always a challenge, although AT&T has previously added 150,000 to 200,000 subscribers in that quarter in previous years.
AT&T may have reduced its marketing and promotions in preparation for its acquisition of DIRECTV. Nevertheless the loss of momentum is clear.
Notably, Verizon also reported reduced subscriber gains for its FiOS television service. It added 26,000 subscribers in the second quarter, the lowest gains in the history of the service. In the same quarter a year previously it gained 100,000 subscribers. With 5.77 million subscribers, just behind AT&T, it also has yet to reach the six million mark.
So far the subscriber gains of these telco operators have largely offset losses by cable companies. Having achieved consistent growth, they may be finding it hard to find new subscribers within their footprints.
As we have often noted, the more subscribers a company has, the greater the natural churn, meaning it has to acquire an increasing number of subscribers just to maintain its base.
Comcast, previously the largest pay-television provider in the United States, lost 69,000 television subscribers in the second quarter, compared to a loss of 8,000 in the first quarter, but an improvement on a loss of 144,000 in the second quarter of 2014. Comcast ended the second quarter with 22.30 million television subscribers, or 906,000 fewer than it had five years previously.
AT&T becomes the largest pay-television provider in the world through the acquisition of DIRECTV. It will move to the number one spot in the informitv Multiscreen Index for both worldwide and the United States.
DIRECTV has been hovering above the 20 million subscriber mark for a few years, with around 20.41 million television customers in the United States.
The combined operation will have around 26.36 million television customers in the United States. Together with DIRECTV operations in Latin America it will have a total of 39.04 million television subscribers.
In that context, the loss of twenty thousand U-Verse television customers seems less significant. The real story will be how AT&T and DIRECTV are able to integrate their operations to deliver the promised synergies.
The informitv Multiscreen Index tracks trends in television services and provides an accessible compilation of top 10 tables and charts showing annual and quarterly changes in subscriber numbers. The index of 100 leading pay-television services worldwide provides a context for comparing changes in customer numbers by region and mode of delivery, as well as ranking those with the largest subscriber gains or losses.